Effects of Leadership Style on Organizational Performance in Small and Medium Scale Enterprises...

8/14/2019 Effects of Leadership Style on Organizational Performance in Small and Medium Scale Enterprises (SMEs) in Nigeri

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European Journal of Business and Management www.iiste.org

ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)

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managers. Mowson (2001) believes that leaders may not excel at management and what is more often the case,managers do not necessarily make great leaders.

Leadership, as Kotler (1990) argues, is more about establishing direction, aligning people, motivating and

inspiring others. Leadership is concerned with long-term outcomes and future goals of the organization.Leadership is more about people and less about tasks. Leaders often put many of the same skills and interest togood use but often to better effect because they focus on areas such as discovering solutions (not problems)

managing changing conditions, excelling in spite of organizational structures, and inspiring personnel to achievetheir goals.

As Nwachukwu (1988) put it, a leader is the most influential person in an organization who provides direction,guides group activities and ensures that group objectives are attained. Leaders act to help a group achieveobjectives with the maximum application of its capabilities. They do not stand behind group to push and toproduce; they place themselves before the group as they facilitate progress and inspire the group to accomplishorganizational goals (Koontz et al, 1980).

The importance of a leader in an organization then cannot be undermined. As Iyoha and Ailoje (1996) pointed

out, without leadership, an organization is but a module of men than machines. It is the human factors whichbinds a group together and motivate it towards goals. Therefore, the efficacy of any organization thus lies on theleader.

Leadership style plays an important role in shaping the behaviour and attitude of the members of an

organization. In recent years, the study of leadership has drawn more attention due to its role in the failure orsuccess of an organization. Over the years, scholars and researchers have not been unanimous on the most

appropriate style of leadership in organization and these has led to the formulation of several theories that couldbring about organizational efficiency and effectiveness.

Though some scholars have argued that no particular leadership style is the best, the level of participation ofworkers in the decisions that affect them or the organization as a whole will spur them to better commitment tothe realization of set goals. Comparatively, participation provides outstanding long term results which are by nomeans far better than effective short term results.

1.2 Statement of the Problem

Leadership style of management is a pre-requisite for effective accomplishment in organizations. The leadershipstyles determine the level of subordinate participation in decision making and the way an organization is runadministratively. Organizations which are low in efficiency tend to have leaders who are highly bossy. Decisionmaking is centered on them alone. Participation in decision making creates an individuals mental and emotionalinvolvement in a group situation which encourages him or her to contribute to group goals and shareresponsibility for them (Chruden and Sherman, 1975).

The problem with most small and medium scale enterprises (SMEs) is that the leaders are not democratic in their

relationship with their subordinate. In fact, leaders in most small and medium enterprises are usuallyauthoritarian in style. They dictate the tune and have the administration of the organization centered on them.

The need for subordinate to participate in decision making is not a passing fancy. It is rooted deep in the cultureof free men around the world and it is no doubt the basic drive in men.

Another problem affecting leadership style in small and medium scale enterprises is the competence of theleaders so appointed. In most cases, some of their appointments lack merit. What becomes of such organizationis having competent leaders who lack the abilities or capacities to use the appropriate leadership style to lead themembers to attain set goals or objectives. Thus, what are usually found in some of these organizations areround pegs in a square hole rather than round pegs in round holes. Once this situation arises, there will beutterances in the way such leaders behave or administers the organization and these will in-turn affect the goalsof the organization.

1.3 Research Questions

The following research questions were asked in this study:

1. To what extent is the effects of leadership style and performance of employees in SMEs?
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2. To what extent is the relationship between leadership style and employees morale in SMEs?

3. To what extent does leadership style enhance employees efficiency in SMEs?

4. Is there a relationship between the managerial leadership style and employees commitment in smalland medium enterprises in Nigeria?

5. To what extent does autocratic style of leadership affect Small and Medium Enterprises in Nigeria?

1.4 Research Hypotheses

The study will geared towards testing the following hypotheses.

(1) There is no a significant relationship between leadership style and organizational performance.

(2) There is no significant relationship between Good leadership style determinant, efficiency and

performance in SMEs.

(3) There is no significant relationship between Leadership style and motivation of employees in SMEs.

(4) There is no significant relationship between autocratic style of leadership on Small and MediumEnterprises in Nigeria.

(5) There is no significant relationship between the managerial leadership style and employeescommitment in small and medium enterprises in Nigeria

1.5 Objectives of the Study

The main objective is to examine the effect of leadership style on the performance of small medium scaleenterprises; other specific objectives include:

1. To examine the effect of leadership style on employees morale in small medium enterprises in Nigeria.

2. To examine the effect of leadership style on employees efficiency in small medium enterprises inNigeria.

3. To examine the impact of autocratic leadership style on small and medium enterprises in Nigeria.

4. To examine the relationship between the managers leadership style and employees commitment insmall and medium enterprises in Nigeria.

2.0 Literature Review

Leadership, as Kotler (1990) argues, is more of establishing direction, aligning people, and motivating andinspiring others. Leadership is concerned with long-term outcomes and future goals of the organizations.

Leadership is more about people and less about tasks. Leaders often put many of these skills and interests togood use but often to better effect because they focus on areas such as discovering solutions (not problems),managing changings, excelling in spite of organizational structure, and inspiring personnel to achieve their goals.

Leaders achieve objectives through energized and excited subordinates who share their passion, vision, anddirection. Good leaders feel comfortable challenging the status quo and finding efficient as well as long-termsolutions to challenges. Good leaders develop through a never-ending process of self-analysis, and the utilizationof education, training, and experience to improve. The best leaders are continually working and studying to

improve their leadership skills (Clharehbaghi and Mcmanus, 2003).

Gil et al. (2005) present a different perspective. They view that both leaders and managers employ a mix of

leadership and management behaviors appears much closer to reality so that they must combine the necessaryskills to direct day-to-day affairs effectively (a role traditionally associated with management) while at the same

time anticipating and managing change (leadership main role). This leads to a simple understanding thatmanagers of contemporary and future organization can not just rely on their management and technical skillswhich are usually referred to as hard skills (Koh and Low, 2008). They will have to be more conversant with soft


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or leadership skills. To be successful in the modern business world, managers will have to find a balancebetween their management and leadership abilities so that they can not only fulfill the performance criteria butalso can create a harmony within their team to build successful and futuristic organizations. This debate does notat all aim to prove that managers are not better than leaders or that only leadership qualities are the ultimate

solution to modern business challenges. The authors argue that management alone is not an answer. Managersshould tie the management with leadership so that they can enjoy the benefits of both worlds.

McCuen (1999) asserts that leadership consists of the knowledge and skills that the individual possesses andemploys to persuade others to enthusiastically work toward the completion of the plan of action that the leaderhas established. According to Goffee and Jones (2000), effective leadership requires being you with skill.Thamhain (2004) takes a distinct stand and argues that effective team leaders are social architects who recognizethe interaction of organizational and behavioral variables and can cultivate a climate of active participation,accountability and result- orientation. Leadership in organizations requires sophisticated skills in leadership,administration, organization, and technical expertise (Thor and Ogunlana, 2006). Mullins (2007) argued thatleadership is at its best when the vision is strategic, the voice persuasive and the results tangible. In the study of

leadership, an exact definition is not essential but guiding concepts are needed. The concepts should be generalenough to apply to many situations, but specific enough to have tangible implications for what we do.

According to Peretomode and Peretomode (2001) leadership is the ability of a person in a group to persuade,inspire or influence the attitudes, behaviours and actions of others or the activities of the organized group so thatthe group members can work cooperative and enthusiastically towards goal achievement, as David, (1967) pointsout, leadership is the human factors, which binds a group together. It also motivates the group towards goals.Management such as planning, organizing and decision-making are dormant cocoons until the leader triggersthe power of motivation in people and guides them toward goals.

Leadership, therefore, is not an end in itself but a means to an end a means to motivate workers to increaseproductivity and help them gain increased employee job satisfaction. Guest (1996) leadership is aboutinfluencing behaviour of others.

Otusanya (2004) in his article, examined Stodgill observation in leadership that; leadership has been defined in

terms of traits, behaviour, influence, interaction patterns, role relationships and occupation of an administrativeposition. Leadership according to Cole (1996:51) is a dynamic process in a group whereby one individualinfluences the others to contribute voluntarily to the achievement of group task in a given situation.

Another concept that is central to this study is small Business Enterprises (SBEs)

The definition of small business enterprise sub-sector varies from country to country, from one industrialgrouping to another. In Nigeria, SBEs has been quantified for definition purposes and described by different

organisations, intellectual and institutions with the country.

Lawal, et al, (2004), Bankers Committee, (2001), Joseph, (2005) defined small business enterprises (SBEs) asany enterprise with a maximum asset base of N200 Million excluding land and working capital and total staffemployed with nothing less than 10 and not more than 300 people.

Oboh, (2004) defined small business enterprises (SBEs) as any enterprise that has an asset base of between N50,000.00 to N 400 Million excluding cost of land and working capital. SMEEIS, (2005), Small Enterprise EquityInvestment Scheme, in addition, defined small business enterprises (SBEs) as any enterprises with a minimumasset base of N500 Million excluding cost of land and working capital. Nevertheless, in 2001, in Nigeria, theNational Council of Industry defined small business enterprises (SBEs) according to their scale of operation:

Micro-cottage enterprises with capital investment of not more than N1.5 Million excluding land butincluding working capital and maximum of 10 workers.

Small scale enterprises with capital investment over N1.5 Million but not more than N50 Millionexcluding land but including working capital with work force that ranges from 11 to 100.

Medium scale enterprises with capital investment of over N50 Million but not more than N200Million excluding land but including working capital and with work force ranging from 101 300.


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However, Edem (2008), stressed that many Small Business Enterprises (SBEs) in Nigeria need nothing less thanN200 Million to run a successful business and that is why a good number of them (SBEs) or entrepreneurs aresceptical about SMEs scheme created by Bankers Committee and the Federal Government. Hence, the reasonswhy some of them (SBEs) have seen themselves as not qualified for the scheme and make no attempt for the

fund.

Small Business Enterprises (SBEs) is of great importance in the area of low capital and output ratio, optimal

utilization of local inputs and other multiplier effect per unit of investment. These are considered the keystrategies to achieving industrial self reliance, employment generation and poverty alleviation.

The capacity of small business enterprises to achieve their goal is undoubted because they promote the use oflocal raw materials, technologies, and man power as well as promote industrial dispersion and balancedevelopment. However, the Nigerian Association of small and medium enterprises (NASME) was established in1996 as the business membership organisation to coordinate and foster the promotion of Micro, Small andMedium Enterprises Development Agency (SMEDAN).

2.1 Theoretical FrameworkFor a better understanding of our subject matter, we shall adopt the eclectic approach and draw from threetheories which include the democratic, the system, and the need theory of individuals. The reason for this is thateach theory reinforces the other.

2.1:1 The Democratic Theory

Though this theory has been largely associated with government, it has become in evitable to relate it toorganizations for proper conduct and effectiveness. As Besse (1957) puts it, the theory is informed two thousandyears ago, participation in the religion which has come to dominate the World. Two hundred years ago we putthis essential element in our political and social structure. We are just beginning to realize that we ought to put

participation in business as well.

The theory is informed by the works of classical and neo-classical theorists such as Aristotle, Plato, ThomasHobbes, John Locke, Jean Jacques, Rousseau, Edmund Burke, James Madison, John C. Calhoun to mention afew. (Baradart, 1979).

The core issue about democracy is the importance it attaches to human personality. (Appadorai,1975). It assumescivic capacity on the part of individuals. This capacity involves intelligence, self-control and conscience. Itsessence is the right of every man bound by the decision of a government (organization) to contribute (what everis in him to contribute) to the making and remaking of those decisions. This right is integral to democracybecause it makes possible free discussion and the continuous participation of the people (individuals) in thegovernment (organization). This implies the obligation to respect the other man, to listen to his arguments and totake into account his point of view. It is through participation that individuals (subordinates) contribute ideas

towards the solution of problems affecting their organization and jobs. Participation can create an asset in moraleso that when necessary orders are given, people will respond more co-operatively because they are participating

in the affairs of the organization.

Participation is ego-and task involvement of an individual in his group. It includes not only the physicalcontribution of the person but also his intellectual and emotional involvement in the affairs of the organization.

(Beach,1975). When leaders establish means for obtaining help from subordinates in the making of plans anddecisions, they are making them to know that their contributions are sought and appreciated and this createsgreat benefits and harmony in the organization.

There is no doubt that participation is a suitable method to which public organizational leaders need to devotelong range efforts and then of tapping its need to be developed.

2.1:2 The Systems Theory of Organization

The systems approach to organization view an organization as a whole with a set of interrelated andinterdependent parts. These parts could be internal or external.


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The individuals are essential part of the organization without which the organization could neither exist norfunction. The theory has its roots in Bertalanfy (1972), who propagated the idea via his publication: GeneralSystem Theory. According to him, in order to understand an organized whole, we must know both the partsand the relations between them. Since Bertalanfy perfected his idea, many scholars have built upon it.

Barnard (1958) in Koontz, et al (1980) emphasized a system of cooperative effort in a formal organization.

Some aspects of the logic of his analysis are:

Physical and biological limitations of individuals lead them to cooperate and once they cooperatewith these limitations become limited and also play a part in inducing further cooperation.

Organizations can be divided into two kinds: the formal organization, which is that set ofconsciously coordinated social interactions that have a deliberate and joint purpose, and theinformal organization, which refers to those social interactions without a common or consciouslycoordinated joint purpose.

The formal organization cannot exist unless there are persons who are able to communicate withone and have a common conscious purpose.

The function of the Executive in the formal organization among others is the maintenance oforganization communication.., and the integration of the whole.

To Barnard (1958), cooperation is thus a creative process and leadership is the fulminator of its forces. Barnardsanalysis has only justified the essence of participation in organizations. Cooperation here includes exchangingideas and creating room for suggestions from subordinates. No doubt, participation does have enormous

potentials for raising productivity, bettering morale and improving creative thinking.

2.1:3 The Need-Satisfaction Theory

The need-satisfaction theories are based on the assumption that human beings have needs and it is their desire tosatisfy specific needs that initiates their behaviours (Nwokoye and Ahiauzu, 1988).

To understand human needs adequately, it is useful to classify them by type. Thus, we have innate or primaryneeds, such as food, shelter, water, rest to overcome fatigue, sex, air, bodily elimination, preservation of self, etc.They are basically physiological needs and vital to the survival of human being. The other major type of need iscalled the acquired or secondary needs.

These needs are dependent upon our experience. They are learned which include the social and esteem needs(egoistic), such as belongingness, self-significance, self-respect, etc. Maslow (1958) in Beach (1975:458), wasthe first to develop the need satisfaction theory from the human relations school of Elton Mayo et al. Others like

Herzberg, Alderfers, and McClelland further developed on it. The primary aim of the theory is to increaseorganizational effectiveness, which could be achieved by properly taking care of the human needs. As we stated

earlier, human needs can be primary or secondary and could also fall into physiological or psychological needs.Maslow (1958) listed five major needs. These are: the physiological needs, safety needs, social needs, esteemneeds and self-actualization.

Herzberg, however, classified Maslows needs into two and tagged them dissatisfiers and satisfiers. Thephysiological needs, safety needs and the social needs are the first part at the lower level of Maslows hierarchy.The Esteem and Self-actualization needs are at the upper level of the hierarchy. One interesting conclusion aboutHerzbergs finding was that satisfaction and dissatisfaction appears to be somewhat independent (Okoh, 1998).

Thus, given that every other thing is in place, the psychological need of man in organization cannot be wishedaway as this brings us to the ego in man. The egoistic needs are concerned primarily with a persons view or

conception of himself. Satisfaction of these needs tends to enhance ones ego. Some writers refer to the egoisticneeds as personal drives. Business executives and individuals tend to be strongly motivated to meet their egoistic

needs. They have a drive for power, prestige and status. They seek to make their mark wherever they are. Theywant to accomplish and achieve. They want others to carry out their words. The individual worker feels a warm


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This however cannot be completely true. There are many techniques to participatory management and theultimate is efficiency and effectiveness. Leaders and subordinates can generally make suggestions and bringforth Ideas which are analyzed and of course, the most plausible idea or suggestion is taken for consideration andindeed subject to reconsideration if found wanting. The principle of participation is dialogue and compromise or

consensus. No single party dominates or considers the other party as inconsequential.

The Contingent or Situational approach to Leadership

The contingent or situational approach takes a middle road position claiming that no one style is the best but

rather the style used by the leaders is contingent upon the situation at a given point in time.

Leading theorists in this retard for the purpose of analysis are: Fred Fiedler and Robert Tannenbaum and WarrenH. Schmidt. Fielders theory implies that leadership is any process in which the ability of a leader to exerciseinfluence depends upon the group task situation and the degree to which the leaders style, personality, andapproach fit the group.

Tannebaum and Schmidt (1996) in other words, it is situational factors and the

interaction between a leader and the situation makes an effective leader.

Tannenbaum and Schmidt (1996), align with Fiedler, but maintain that three variables should be analyzed inNwachukwu (2007). These are forces in the leader, forces in the followers, and forces in the situation. Theforces in the leader according to them include the value system of the leader, his confidence in subordinates, the

leadership inclinations and feeling of security in an uncertain situation. All these will inform the leadership

The forces in the subordinates include their willingness to follow and this can be premised on whether their

high needs are met. The effective leader is therefore the one who can identify the different situational needs ofthe subordinates and fulfill them. Leadership is followership. It is therefore, useful for leaders to understand theforces at work within group members. According to Tannenbaum and Schmidt (1996), such understanding canhelp the leader structure his or her own behaviour or style.

The forces in the situation include the type of organization, the effectiveness of the work group, the type ofproblem or task and the pressure of time for decisions to be made. The stand of Fiedler and Tannenbaum andSchmdt is quite clear. There is no doubt that certain situations may call for a particular leadership style. Forexample, emergency situations or the pressure of time for decisions to be made.

The leader in his wisdom can in this situation take a decision on behalf of the group. However, the snag is that heshould in no distant time (say within 48 hours) brief his subordinates, whose contributions he must be willing to

consider. In this wise, he would have been democratic.

The force in the leader should also not be a barrier. Leadership behaviours can be learned. Leaders should be

trained in this regard and where they remain adamant, they should be shown the way out. A leader who knowshis onions and has no skeleton in his cupboard should have confidence in his sub-ordinates and have a positiveinclination to wards them.

2.3 Classification of Leadership Styles

Likert (1961) in Mullins (2007:280) noted that there are many dimensions to leadership and many possible waysof describing leadership style, such as dictatorial, unitary, bureaucratic, benevolent, charismatic, consultative,participative and abdication. The style of managerial leadership towards subordinate staff and the focus of powercan, however, are classified, broadly, within a simplified three-fold heading.

The authoritarian (or autocratic) style is where the focus of power is with the manager and all interactionswithin the group move towards the manager. The manager alone exercises decision-making and authority fordetermining policy, procedures for achieving goals, work tasks and relationships, control of rewards orpunishments.

The democratic style is where the focus of power is more with the group as a whole and there is greaterinteraction within the group. The leadership functions are shared with members of the group and the manager is

more part of a team. The group members have a greater say in decision-making, determination of policy,implementation of systems and procedures (Koontz and Wherich, 2004).


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Nwachukwu (2007) submits that a laissez-faire (genuine) style is where the manager observes that members ofthe group are working well on their own. The manager consciously makes a decision to pass the focus of powerto members, to allow them freedom of action to do as they think best, and not to interfere; but is readilyavailable if help is needed. There is often confusion over this style of leadership behaviour. The word genuine

is emphasized because this is to be contrasted with the manager who could not care, who deliberately keepsaway from the trouble spots and does not want to get involved. The manager just lets members of the group geton with the work in hand. Members are left to face decisions that rightly belong with the manager. This is more anon-style of leadership or it could perhaps be labeled as abdication.

2.4 Factors Affecting Style of Leadership

Tannenbaum and Schmidt (1973) and Mullins (2007), argued that attention to the managers style of leadershiphas come about because of a greater understanding of the needs and expectations of people at work. It has alsobeen influenced by such factors as:

increasing business competitiveness and recognition of efficient use of human resources; changes in the value system of society; broader standards of education and training; advances in scientific and technical knowledge; changes in the nature of work organization; pressure for a greater social responsibility towards employees, for example through schemes of

participation in decision-making and work/life balance; and

government legislation.Mullins (2007:372) suggested that all of these factors have combined to create resistance against purely

autocratic styles of leadership.

2.5 Importance of Small Business Enterprises (SBES)

Joseph (2005), posited that the importance of the SBEs sub-sector of the economy of the states can not be over-emphasised. Large scale businesses grow out from small scale enterprises. The experience of countries in NorthAmerica and Western Europe is a good example that should challenge us today, particularly in Nigeria. Thesuccess story of industrialization process in the United States, Netherlands, Germany, and Japan is a testimony of

the outstanding performance and contribution of the SBEs to those economies.

According to CBN (2004) the contribution and importance of the small business enterprises (SBEs) sector to an

economy thus include:

Employment generation:The small business enterprises sub-sector in Nigeria employed about 70% of industrial

labour force. Similarly, the agricultural sector which consists mostly of small scale farmer, account for over 60%of the nations work-force.

Utilization of local resources: Small business enterprises (SBEs) have creativity in utilization of local rawmaterials as they do not require high level of technology to produce.

Output expansion: SBEs contribute about 10 15% of the Gross domestic Product (GDP) - most of the foodsproduced are from the small scale farmers

Transformation of traditional / local technology: The modern sectors grow through a process of structuraltransformation and modernization out of the traditional sector. The transformation process includes upgrading in

skills, machinery, and equipment and management practices.

Production of intermediate goods: The SBEs sub-sector provides backward and forward linkages needed bylarger firms example raw materials, machinery and equipment, spare parts and household goods.


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Promote even development and reduce income disparities:SBEs need small capital to start operations. Theirproduction process and management style are simple.

Increase in Government revenue base:This is through taxes personal and company income taxes.

2.6 Style of Leadership in Small and Medium Scale Enterprises (SMES).

Economic dynamism has long been attributed to the activities of SMEs. In Adedeji (2001), Mill (1848);Schumpeter (1934); MacLelland (1961) and Hagen (1962) Scholars have over the years tried to identify thedistinguishing characteristics of this agent of change. Mill (1848), defines an entrepreneur as an individual with apropensity to take risks. For Schumpeter (1947:151), the defining characteristic of an entrepreneur is simply

the doing of new things or the doing of things that are being done in a new way.

McClelland (1961) considers SMES with the following characteristics: a liking for moderate risk taking;

confidence in ability to succeed; energetic action directed towards ones self advancement; the desire forfreedom and individual responsibility; and individual success usually measured by the acquisition of wealth.

The distinguishing characteristic of SMEs autonomy is the freedom to take decisions according to theindividuals preference. Many organizations owe their existence to the individual efforts of entrepreneurs. Neworganizations are formed as SMEs devote time and effort and assume personal financial, psychological, andsocial risks to introduce innovations. The formation and the survival of an organization during its formativestages might depend on the individual efforts and personality of its founder. The problem with SMEs style ofleadership, however, is that it is personalized. Entrepreneurs are visionaries who value the autonomy to make

decisions as they see fit and to take personal responsibility for those decisions in order to realize their visions. Asa result SMEs leaders tend to maximise control and eschew delegation of authority and responsibility, preferring

instead to directly carry out or to supervise most of the day-to-day operations of their organizations themselves.Gorb et al., (1981:209) Perrigo (1980:215). This type of management, however, allows SMEs to offerpersonalized service or attention to their clients thus giving them a competitive advantage over large enterprises.

Delegation is related to the expansion of the business. As the business expands, there is more division of labourand the entrepreneur has to be aware of the extent of the growth of the business so that division of labour anddelegation can be properly planned.

According to Lawal, et al (2002) the archetypal entrepreneur is the embodiment of the business with his or herown personal welfare being closely intertwined with that of the enterprise. This close identification of thebusiness with its owner prevents the development of businesses into corporate identities with interests which aredistinct from those of their owners. The lack of separation between the individual owners and organizationalinterests prevents the formation of partnerships with both relatives and non-relatives. Indigenous businesses aregenerally small and bureaucratic characteristics, coupled with the autocratic leadership characteristic in SMEs

are likely to render the succession process in the organizations unpredictable and more likely to be disruptive.

RESEARCH METHODS

3.1 Research DesignA research design is a specification of procedures for collecting and analyzing the necessary data to help solve agiven research problem. For the purpose of this study, explorative qualitative research of the case study wasused. This approach is suitable in diagnosing research problems, in screening alternatives and for discovering

new ideas. It also makes use of survey research.

The nature of the study necessitates the use of a descriptive research design as it is concerned with finding out

the respondents attitudes towards leadership styles in their workplace and how it affect their employeesperformance. This method is appropriate in the study because it is concerned with actually finding out therespondents remark on the type of leadership styles they experience and how these styles affect every day

performance on both the employees and the organization in whole.

3.2 Population of the StudyThe study population is the aggregation of overall SMEs employees in Lagos state. However, two hundred(200) employees were randomly selected from only twenty (20) registered SMEs in Lagos State. This figure is


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Chi-square

The Chi-Square is tested of significant which makes use of data in the form of observed frequencies. It is ameasure of the discrepancy existence between observed and expected frequencies. It can never be less than zero

and it is calculated by finding the frequencies. Chi-Square is calculated using the statistical model.

X (O-E)

E

Where:

X = Calculated value

O = Observed value

E = Expected value

N = Number of rows in the expected frequency table

K = Number of columns in the expected table

Level of significance is usually 0.05 from variables that do not involve lives, while 0.1 is for variables thatinvolve lives.

Degree of Freedom (DF) =(R-1) (C-1)

Decision Rule: This states that the researcher should reject Null Hypothesis (HO) if the probability of obtaininga given or more extreme magnitude, when HO is true is equal or less than some small number. In order words,reject HO if the calculated (empirical value) of the statistics are greater than the table (critical value) at the levelof significant otherwise accept the HO.

4.0 Test of Hypotheses

In this part of the section, the formulated hypotheses are tested one after the other using the chi-square non-parametric test.

Hypotheses One

HO: There is no significant relationship between leadership style and organizational performance.

To test the above hypotheses, the chi-square (x2) test of goodness of fit was employed. The formula is as follows:

X2=

Where,

0 = Observed frequency of any value

E = Expected frequency of any value

= Summation notation

In this calculation, E = 120 4 = 30


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(Since there are 120 respondents and four options/responses)

Response O E O-E (O-E)2 (O-E)2E

A 50 30 20 400 13.3

S.A 52 30 22 484 16.1

D 18 30 -12 144 4.8

S.D 0 30 -30 900 30

TOTAL 120 - - 64.2

Thus, X2= 64.2

It is now necessary to find the appropriate X2

vale from the chi-square Table. But before this is done, it isnecessary to establish the degree of freedom, V. This is found by multiplying the number of rows in the tableless one, by the number of columns less one.

In Table I

No of Rows = 4 (i.e. 4 horizontal rows of Responses)

No of Columns = 2 (i.e. 1 for Response and 1 for No. of Responses)

Any column or row for calculated variables like Percentage or Total is not counted among the columnsor rows.

Degree of freedom, V = (Rows -1) (Columns -1)

= (4-1) (2-1)

= 3 x 1

= 3

i.e 3 degrees of freedom. From the chi-square table, the value of the cut-off point of X2for 3 degrees of

freedom at 5% level is 7.815

Decision Rule/Criterion

When the chi-square calculated (x2c) is greater than the chi-square tabulated (X2t) we reject the null hypothesis(Ho) and accept the alternative hypothesis (H1) and conclude that the research hypothesis is true, i.e. x

2C> x

2t

On the other hand, if the chi-square calculated (x2c) is less than the chi-square tabulated, i.e. x

2c > x

2t, we accept

the null hypothesis and reject the alternative hypothesis and conclude that the research hypothesis is false.

Decision

From the above calculation, the chi-square calculated 102.46 i.e. x2c is greater than the chi-square tabulated(7.815) i.e. x2t. Therefore, we reject the null hypothesis. Thus, we can conclude that there is a significantrelationship between leadership style and organizational performance.

Hypotheses Two

HO: There is no significant relationship between good leadership style determinant, efficiency andperformance in SMEs.


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To test the above hypotheses, the chi-square (x2) test of goodness of fit was employed. The formula is

as follows:

X2=

Where,






Response O E O-E (O-E)2 (O-E)2

E

A 42 30 12 144 4.8

S.A 58 30 28 784 26.1

D 20 30 -10 100 3.3

S.D 0 30 30 900 30

TOTAL 120 - - - 64.2

Thus, X2= 64.2

It is now necessary to find the appropriate X2 value from the chi-square Table. But before this is done, itis necessary to establish the degree of freedom, V. This is found by multiplying the number of rows in

the table less one, by the number of columns less one.

In Table II





= (4-1) (2-1)

= 3 x 1

= 3

i.e. 3 degrees of freedom. From the chi-square table, the value of the cut-off point of X2for 3 degrees of



When the chi-square calculated (x2c) is greater than the chi-square tabulated (X2t) we reject the nullhypothesis (Ho) and accept the alternative hypothesis (H1) and conclude that the research hypothesis is

true, i.e. x2C > x

2t


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On the other hand, if the chi-square calculated (x2c) is less than the chi-square tabulated, i.e. x

2c > x

2t,

we accept the null hypothesis and reject the alternative hypothesis and conclude that the researchhypothesis is false.

Research Result

From the above calculation, the chi-square calculated (147.93) i.e. x2c is greater than the chi-square

tabulated (7.815) i.e. x2t. Therefore, we reject the null hypothesis. Thus, we can conclude that good

leadership style determines efficiency and performance in SMES.

Hypotheses Three

HO: There is no significant relationship between Leadership style and motivation of employees inSMEs.

To test the above hypotheses, the chi-square (x2) test of goodness of fit was employed. The formula is

as follows:

X2=

Where,







A 34 30 4 16 0.5

S.A 65 30 35 1225 40.8

D 11 30 -19 361 12.0

S.D 10 30 -20 400 13.3

TOTAL 120 - - - 66.6

Thus, X2= 66.6

It is now necessary to find the appropriate X2vale from the chi-square Table. But before this is done, it

is necessary to establish the degree of freedom. This is found by multiplying the number of rows in thetable less one, by the number of columns less one.

In Table III





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69


= (4-1) (2-1)

= 3 x 1

= 3




When the chi-square calculated (x2c) is greater than the chi-square tabulated (X2t) we reject the null

hypothesis (Ho) and accept the alternative hypothesis (H1) and conclude that the research hypothesis istrue, i.e. x

2C> x

2t

On the other hand, if the chi-square calculated (x2c) is less than the chi-square tabulated, i.e. x2c > x2t,

we accept the null hypothesis and reject the alternative hypothesis and conclude that the research

hypothesis is false.

Decision

From the above calculation, the chi-square calculated (66.6) i.e. x2c is greater than the chi-square

tabulated (7.815) i.e. x2t. Therefore, we reject the null hypothesis. Thus, we can conclude that,autocratic style of leadership affects small and medium scale enterprises in Nigeria.

Hypotheses Four

HO: There is no significant relationship between the managers leadership style and employeescommitment in small and medium scale enterprises in Nigeria.

To test the above hypothesis, we shall employ the chi-square test of goodness of fit using the formulafollows:

X2=

Where,0 = Observed frequency of any value

E = Expected frequency of any value = Summation notationIn this calculation, E = 120 4 = 30



A 12 30 -18 324 10.8

S.A 88 30 58 3364 112.1

D 18 30 -12 144 4.8

S.D 2 30 -28 784 26.1


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TOTAL 120 . . . 153.8

Thus, X2= 147.93

It is now necessary to find the appropriate X2 vale from the chi-square Table. But before this is done, itis necessary to establish the degree of freedom, V. This is found by multiplying the number of rows in

the table less one, by the number of columns less one.

In Table IV



Any column or row for calculated variables like Percentage or Total is not counted among the columns

or rows.


= (4-1) (2-1)

= 3 x 1

= 3




When the chi-square calculated (x2c) is greater than the chi-square tabulated (X2t) we reject the null

hypothesis (Ho) and accept the alternative hypothesis (H1) and conclude that the research hypothesis is

true, i.e. x

2

C > x

2

tOn the other hand, if the chi-square calculated (x2c) is less than the chi-square tabulated, i.e. x2c > x2t,we accept the null hypothesis and reject the alternative hypothesis and conclude that the research

hypothesis is false.

Research Result

From the above calculation, the chi-square calculated (153.8) i.e. x2c is greater than the chi-squaretabulated (7.815) i.e. x

2t. Therefore, we reject the null hypothesis. Thus, we can conclude that there is a

relationship between the managers leadership style and employees commitment in small and medium

scale enterprises in Nigeria.

4.1 Discussion of Findings

The findings of this research have revealed the importance of leadership styles on employeesperformance in the organization, which is an aggregation of the individual employees productivity. Alarge percentage of the respondents agree that SMES management engage in leadership management.This finding is strongly agreed with the view of Lawal, et al (2002), that SMES managers have effectiveleadership style that enhances employees performance. This findings also agree with the respondentview on the instrument distributed, (Field Survey 2013).

The need has not been adequately met in some of the SMES firms as acknowledged by few of therespondents. Many of the respondents are of the opinion that the effective leadership style enhancesemployees performance. Beach, et al, (1975) also opined that continuous use of effective leadership

styles of management means continuous goal objectivity in organization and employees performance.

This study has also established that the availability of appropriate tools of leadership management inSMES enhances employee performance. 100% of the respondents attested to this.


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In summary, this research work has outlined the effect of leadership styles on employees performancein SMEs, using selected SMES in Lagos State. Aspects of the internal environment studied related tothe quality of work of the employees. Among specific areas that fall under the rubric of leadership gridmanagement, quality of work life includes a challenging job, a safe working environment, human

dignity in the work environment, an equitable wage, and the right to improve ones skills level (MBO)techniques (Luthans, et al 1980:12). This work has proved that the better the organizational leadershipstyles, the greater the employee performance in SMES.

5.0 Recommendations

In view of the findings of this study, the following recommendations would be helpful to the selected SMES andother organizations in Nigeria, to redress some of the challenges facing them, especially in the area of leadership

styles of management and general management of people at work.

Secondly, aside from the academic qualification and seniority, workers should be rewarded more on the basis ofperformance. Since this research work has shown that performance-related pay spurs employees to greater

performance, it is strongly recommended that workers salaries be based more on performance than otherparameters. In other words, performance appraisal should play a greater role in the promotion process. And

every level of responsibility and result achieved must be with a corresponding of remuneration.

Fourthly, on performance, it is strongly recommended that workers should be periodically promoted or upgraded

within a period of not more than four years. While this serves as recognition of their good work, it provides alarger scale for measuring their benefits. This brings satisfaction to the employee and encourages him/her to

improve in performance.

Finally, organizations should, adopt the democratic style of leadership and humane management practices in

order to adequately commit the workforce to the work activities.

In summary, implementation of these recommendations in any SMES organization would lead to humanizationof the work and working environment. It would make workers have a sense of belonging and positively affect

their work behaviour or attitude to work. Ultimately, employees productivity and performance of the individualworkers and those of the organization itself would remarkably increase.

5.1 Conclusion

The above conclusions were drawn from the analysis of data collected from the field surveys conducted by theresearcher. From these, it can be inferred that SMES employees are not as well paid as they would want, thoughthe presence of good leadership styles management enhance their performance.

Leadership plays an important role in the behaviour and attitudes of the members of an organization. It alsodetermines how people would interact with each other in order to solve problems and take decisions. The field ofleadership not only focuses on interpersonal relations but also appreciates the role of a leader as a motivator andenergizer. The objective of this research was to enhance the understanding of emerging dominant leadershipstyles in selected SMES firms in Lagos State. The study revealed that most SMES firms in Lagos have samemanagement styles of leadership.

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